Good day, ladies and gentlemen, and welcome to the First Quarter 2011 Advanced Energy Earnings Conference Call. [Operator Instructions] I would now like to turn the presentation over to your host for today's call, Ms. Annie Leschin, Investor Relations. Please proceed, ma'am.

Thank you, operator, and good morning, everyone. Thank you for joining us this morning for our first quarter 2011 earnings conference call. With me today are Hans Betz, Chief Executive Officer; and Danny Herron, Executive Vice President and CFO, both of whom will present prepared remarks. By now, you should have received a copy of the earnings release that was issued last evening. For a copy of the release, please visit our website at www.advanced-energy.com or contact us at (970) 407-4670. Advanced Energy will be participating in a number of conferences this quarter, including the BMA Small and Mid-Cap Conference on May 11 in Boston, the Credit Suisse Semi Equipment Conference on May 12 in Boston, the Needham CleanTech Conference on May 17 in New York and the Stifel conference on May 24, also in New York. As other events occur, we will make additional announcements. I'd like to remind everyone that except for historical financial information contained herein, the matters discussed in this conference call contain certain forward-looking statements subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Statements that include the terms believes, expects, plans, objectives, estimates, anticipates, intends, targets or the like should be viewed as forward looking and uncertain. Such risks and uncertainties include, but are not limited to, the volatility and cyclicality of the industries we serve, the timing of orders received from our customers and unanticipated changes in our estimates, reserves or allowances, and other factors listed in our press release. These and other risks are described in Form 10-K and 10-Q and other reports filed with the SEC. In addition, we assume no obligation to update the information that we provide you during this conference call, including the second quarter guidance provided during this call and in our press release dated today. Guidance will not be updated after today's call until our next scheduled quarterly financial release. I'll now turn the call over to Hans Betz, CEO of Advanced Energy.

Thank you, Annie, and welcome, everyone. Similar to last quarter, we are going to refer to the set of earning slides that we have posted on the IR section of our website to help walk through the quarterly results and outlook for our markets. If you'll turn to Slide #4. I'll begin with some of the highlights of the first quarter of 2011. I would like to start with a recap of the quarter. 2011 began with very solid results for Advanced Energy as we met our top and bottom line projections. Operating under our strategic business unit structure for the first full quarter, total revenue was $137.7 million driven by stronger-than-expected Thin Film sales to the semiconductor market. We continued to align our strategic business units and streamline our costs and processes to best capitalize on this structure. This led to an improved operating margin of 17.7% and GAAP EPS of $0.43 per share. Overall, we were very pleased with our performance. At our Analyst Day in early March, we commented that we were seeing signs of improved sentiment from our semiconductor customers since the beginning of the quarter. This manifested in higher Thin Film results for the quarter than original anticipated and once again demonstrated the advantage of a diversified business model. This quarter, our Thin Film business compensated for the greater-than-normal seasonality in our Renewables unit, contributing 73% of total revenue, versus Renewables' 27%, enabling us to achieve our projections for the quarter. Let me begin with semiconductors on Slide #6. At the beginning of the quarter, our sales to semiconductor market looked as if it would slow down from the fourth quarter. Three months later, the industry's CapEx investments drove our sales from this market to climb 14% sequentially and approach record levels. Orders were strong…

Thank you, Hans, As Hans discussed, we began 2011 with a solid first quarter. The seasonal weakness in Renewables was offset by strength in our Thin Films business, highlighting the advantages of our diversified business units. Where in some quarters our Renewables business has helped to moderate the effects in capital spending cycles, this quarter, we saw the reverse with our Thin Films business compensated for some of the slightly stronger-than-normal seasonality that our Renewables unit experienced. As a result, our Thin Film business unit contributed 73% of total revenues and Renewables 27%, and we achieved our revenue and earnings goals for the quarter. Turning to Slide #9. As expected, revenues fell 7.4% versus the record fourth quarter to $137.7 million. Year-over-year, total revenues rose 97.5% from $69.7 million in the first quarter of 2010. This robust year-over-year growth was largely driven by our successful acquisition of PV Powered, which was announced early in 2010 and closed in May. Combined with our Solaron inverter offerings, the acquisition has expanded the breadth and depth of our inverter product line and increased our penetration of the emerging North America inverter market. The improvement in the economy has led to increased capital spending in a number of Thin Films markets, providing the company a variety of growth engines throughout its markets. Our Thin Film business unit had sales of $100.1 million, representing 72.7% of total sales, and first quarter operating income was $24.8 million. Thin Films was primarily driven by strength in our core semiconductor market with sales of $46.0 million or 33.4% of total sales. Semiconductor sales increased 14.3% sequentially and 12.2% over the same period last year. Sales to our solar panel and glass markets were $24.5 million or 17.8% of total sales. This was down 5.1% from the fourth quarter…

[Operator Instructions] And your first question comes from the line of Colin Rusch representing ThinkEquity.

Congratulations on a solid quarter. Can you give us a little bit more color on the geographic distribution for the solar backlog, if all that's in North America, and if you're starting to see any pickup in activity in Asia?

As you know, we are focused almost entirely on the U.S. market there. In fact, in our outward guidance, we're not really incorporating anything for Europe in there. We did have 1 megawatt in Asia this quarter, but most of our focus is on the U.S. market, in the North American market.

And then on the cost side with PV Powered, can you talk a little bit about what you're expecting in terms of margin improvement from improved sourcing and improved component design this year and what you might expect to see looking into 2012?

I think what we see is some kind of very different gross margin ranging from a pretty low gross margins in the low-power systems up to a more than 30% gross margin on the high-power things. What we try to achieve by having PV Powered integrated in AE is a broader and higher purchasing power, in particular on those standards components like PCB boards, which we see some impact already. And, of course, in the situation in which PV Powered is, I think we have always some kind of design improvement in order to lower down the material costs, which, of course, turns into a higher gross margin. So we are working on that and I think we have some experience how to do that.

And just in terms of the actual improvement, you're seeing a little bit of benefit from the PC boards. And anything else here over the next couple of quarters?

Colin, you'd always have your purchasing power from putting the 2 companies together. We can get better rates on commodities like steel for the cabinets and things like that. So those continue to be in place, as well as taking the best of the best between both AE Solaron and the PV Powered product and making sure we implement the manufacturing processes that are the best.

Okay, great. And then on the solar capital equipment side, can you just break down, well, which part -- or out of the roughly $23 million, $24 million that you have for the quarter, how much was on the Thin Film side and how much of it was really crystal and solar? And what that backlog looks like going into 2Q.

Colin, I mean, not breaking out exactly what the percentage is, but I think we can say that the crystalline part of our business is the majority. And looking forward, I think as we spoke about earlier, I think China, which is our main customer, has reached its peak in the manufacturing of solar panels, and there will be a pause independent whether it's crystalline or Thin Film.

And do you have a sense of timing on that front? And that's my final question.

It's hard to say, but we have 2 hats on our head, which is -- one is the Thin Film part of our business. The other one is the inverter part. And if you have an oversupply on panels, we may benefit on the inverter side because the prices are dropping, and if the price are dropping, it's more attractive for building new installations. So at this point in time, I have no really clear view of what's the timeline for the pause is at this point in time.

And your next question comes from the line of Bill Ong representing Merriman Capital. William Ong - Merriman Curhan Ford & Co.: Can you talk about how many megawatts were booked in the quarter? And also the percentage mix between large projects? Let's say 100 megawatts and above, versus smaller projects? And also, how long does it take to complete a typical small project versus a larger project?

I mean, the smaller projects have a much shorter timeline. And if you could see from our large win on the Zachry and PG&E, I think these are stretching over sometimes 2 years. The biggest project is stretching over 2 years. In the smaller, like commercial installation, I think it's just a matter of quarters.

Yes, we typically don't break out the details of the backlog and the bookings, but I will say that majority of our business is 250 kW and above. I mean, at the end of the day, our entire commercial product line is well received and very popular in North America, but our focus is on the larger products. William Ong - Merriman Curhan Ford & Co.: That's helpful. So as you sought to get larger and larger megawatt projects, does that impact your inventory turns, if any?

Not really. The lead times stay consistent. It stretches out the length of the project. As Hans said, a large project, like the one we just announced in Arizona, is going to take a couple of years from beginning to end. But it doesn't really impact our inventory because we ship in progress during the project. William Ong - Merriman Curhan Ford & Co.: That's helpful. And nice job, everyone.

And your next question comes from the line of Zach Larkin representing Stephens, Inc.

I wondered if you can give us a little bit of an update and some color on the competitive landscape in North America, if you're seeing any impact from some of the new competitors who are trying to enter this market. And also, talk a bit about the pricing in the region.

Well, let me answer the last question of your questions. I think, of course, we see some kind of price pressure, but it's not out of the norm, and I think we are used in our Semiconductor business that there is a continued growth -- pressure in prices. And we have some experience in how to do that. On the other side, with our service offering, I think, to a certain degree, we can send off too much price erosion anyhow. And part of the agreement in Zachary, I think, was the performance of the inverter. But at the same time, I think this kind of superior service offering was part of that, too. So therefore, it's not out of the norm. As far as the competitive landscape is concerned, we see one strong competitor, which is from the European side, which is SMA, but SMAs claim in an area which we do not pinpoint that much, which is string inverters, which is residential part. And we haven't seen too much on Power-One yet. But we do see, of course, on a regular base Satcon and Siemens

Also along that same line, could you give us a bit of an update on your capacity expansion plans and how things are moving and what we should expect to see on that front?

Yes, as we've mentioned, I think all the time because the question comes up every time, because the question comes up every time, we have an actual capacity between Bend and Fort Collins, which satisfies, I think, all what we expect as a revenue this year. But in addition to that, we do have Celestica in Canada, and we have SGG in China. And to keep in mind, the expansion of capacity is it pretty simple, straightforward and not very expensive situation? What you have to have is space. What you need in addition to that is test space for your inverters. But that's it. So it's a very quick expansion, always possible, as we have shown in the past.

Right, okay.

And your next question comes from the line of Edwin Mok representing Needham & Company. Edwin Mok - Needham & Company, LLC: So first question is on your guidance. Can I ask what is baked into the Renewable versus the Thin Film part of your business? Are you assuming that Renewable will be growing while Thin Film parts is declining? And then a follow-up question regarding that is, what is baked into your gross margin guidance?

Yes. Generally, for our guidance this quarter of 148 to 160, we have about a 50% growth factor in there for our Renewables business, and we have a 4% or 5% decline in for our Thin Film business. And that's our current view. Obviously, these markets are extremely dynamic. They change all the time. That is one of the nice advantages of having a diversified revenue stream. But at this point, that's what we would have in there. And obviously, that drives to a different EPS. We would expect in Q2 that our op expenses as a percent of revenue will come down. But because the margin is lower in the Renewable business than it is in the Thin Film business, we'll have a slightly lower EPS. Edwin Mok - Needham & Company, LLC: I see. Very helpful. And then on the operating margin side on the Renewable, have you thought a little bit that longer term? Well, what do you think you can achieve in terms of operating margin for your Renewable business?

Yes. For 2011, we still anticipate something in the 15% range. Remember, this is business that in Q4 shipped $51 million worth of products. So it has an infrastructure that's been set up for that level of revenue. This quarter, the revenue was down to $38 million. So if you just did the simple math, you can see the significant impact that lower revenue would have. If you take this quarter and use our 50% factor, you can also see the leverage that, that could have in Q2. So we think long term we still have a very good 15%, 16% business.

Now maybe I'll give you a bit more color on that, too. Because on the Thin Film side, we always have a very diversified product portfolio, which, of course, calls for a pretty high R&D in order to stay on top of the pack. That means we have a high mix, low volume. On the inverter side, we do have a high volume, low mix because the platform is pretty much the same through the different power levels. That means in turn, on the long-term side, even though we do have a lower gross margin, but the expenses in order to have R&D engineering at the Fort is lower as well, and the manufacturing side is simple as well because you have many high volume, low mix, so therefore, we expect on the long term that the uptake is the same as we see in the Thin Film area. Edwin Mok - Needham & Company, LLC: Great. It's very helpful there. A follow-up question on the renewable side. So, congrats on winning the Cypress project there. I was wondering, I mean, just some color you can provide on that win in terms of what potentially that project could become since in Zachary the detail was provided there. Did you try actually to work with Cypress? And as they decide to build out the rest of that whole pipeline, that you expect to potentially win the rest of that business?

Well, certainly, that would be our goal. I mean, we're there on the first 150 megawatts. We expect to perform very well. We think that was a very competitive situation. We won based on our product reliability and on our service offering. And we think being there, improving that every day should give us certainly the opportunity to continue on that project as it builds out. Much like Southwest Airlines only uses 737s, we hope that, that project only uses Solaron inverters. Edwin Mok - Needham & Company, LLC: That's a good comparison to Southwest. One question on inverter pricing, right? If I take the 150-megawatt shipment that you guys have and just plucked that into the revenue that you guys represent, reported, I thought it was a little over $0.30 ASP, right, versus typically, you guys talk about below $0.25 ASP for your product. I was wondering, well, what is the disconnect there? Is that more on just other pieces that you guys are selling? Can you help us out with that?

Yes. Certainly, when you look at the total project, there are some accessories that we had on there, remote-sensing, various things. There's probably some spares in there that are part of the total also. So it's a number of items there. So it's real hard to do the math you did to get the pricing on a per unit basis.

And that's -- if you look at the factors of success going forward, in particular the large utility projects, it's more important to have the availability, the uptime. And there's a very clear trend into some kind of performance guarantee, which in turn is exactly where we have been playing into as a mission critical element in the service side. And just think about the fact if we wouldn't have a top-notch service environment, we would have been kicked out of the Semiconductor business right away. So we are in a situation, luckily, that we have some heritage in our business, in the Service business, which helps us a lot in order to secure businesses as a salesforce. And if people think they can easily build up a salesforce which is matching our experience, I can just warn you, it's not that easy. Edwin Mok - Needham & Company, LLC: Great, yes, that's very good color. It sounds like that you've got the -- that it did help you guys win the Zachry project. But actually, one quick follow-up with that. How much -- the increase in ASP or ISP, is that haunted by the increased sell of PowerStation solutions? Did you guys actually recognize the revenue of the component that is used in the PowerStation?

Only one. It's been part of the total sale as we put this together. In creating the PowerStation, that is our revenue. Edwin Mok - Needham & Company, LLC: Great, that's all I have.

Your next question comes from the line of Krish Sankar representing Bank of America-Merrill Lynch.

Yes, I had a couple of question. Hans, some of your customers, like LAM and Novellus have spoken of more pushouts. Have they actually communicated that to you yet?

What we see from both, they have been guiding downwards in Q2. And in the communication with these key customers, we have the sentiment that the second half of the year, it's still rebounding and we will see what we hear from our customer, what we anticipate, a still very high spending on CapEx over the year.

Got it, got it. Okay. And then another question I had was, what did you say your service revenue was in Q1?

Well, $14.5 million, I believe, was the number.

$14.5 million? Okay. And then final question. The op margin on the inverters in Q1, like 6.5%, is pretty low. Is that a onetime aberration or do you think the operating margin is getting to, like, the mid-teens is a longer term goal and it's going to take us a while to get there?

Yes. Now we would anticipate 2011 to have op income in the 15% range for our Renewables business. Q1 was simply a function of lower volume. As I mentioned, in Q4, we shipped $51 million worth of product. So we have an infrastructure that's set up to ship that level and higher. And we anticipate that business to continue to grow. As we mentioned, Q2 should be up about 50%. Long term, our company goal is to get to an op income of 20%, and we think that's very reachable in the next several years through leveraging our infrastructure and growing our top line. We have every intention to try to do that this year.

So the more we get these kind of big projects in which we can apply our Solaron, and as you know, historically, the Solaron has a much better gross margin, which is just the fact in the high-power realm, generally speaking.

Your next question comes from the line of Timothy Arcuri representing Citi.

Hans, a couple of things. First of all, can you give the backlog number? Is the $145 million the right backlog number?

You'll have to refer to Danny.

Yes, our current backlog is about $140 million.

Okay. So there were a couple of backlog adjustments in the quarter?

Yes. And you know, roughly, we've -- of our backlog, about 50% or 60% of it is shippable in Q2. I'm going to preempt that with you, Tim.

Okay, yes. And how much of that is inverter? Of the $140 million?

We're not breaking it down between the 2 business units.

Okay. And relative to the guidance, I don't know, I jumped on late, but what is the assumed inverter business for Q2 in terms of megawatts or in terms of revenue? Did you give us any sense on that? How much will it grow?

Yes. What we did, Tim, is gave some color around about a 50% growth is what we are anticipating for the Renewables business in Q2. And we expect our Thin Film business to be down 4%, 5% for the quarter. Obviously, that drives total revenue up, which will reduce our op expense as a percent of income. But because of the different margin profiles of those, we'll see EPS drop slightly at the midpoint of our guidance versus Q1. But it's all mix related. Actually, we're doing a better job leveraging our op expense as we move forward.

Okay. And then just so I'm clear on the megawatt. So should the megawatts also grow by about 50% so that the dollar per megawatt should be about the same?

Yes, It's not correlated 1:1 because they have different power levels, which we play into. But I think at the first approximation, it's probably correct to assume that.

Okay, great. And then just last thing. Hans, do you, -- you guys have pretty big -- obviously, you're very leveraged to the U.S. market. So you have a pretty good sense of how big it is. So what do you think the size of the U.S. market is, the U.S. solar market PV for 2011? And what do you think your share is of the market?

I think I can give you a pretty good picture of what the supposed overall market is, which is somewhere between 2.5 and 3 gigawatts. I mean, as far as our share is concerned, I think we have -- at least we had in Q1 a share of 25% and we, of course, are pretty confident to grow the share. To which degree, Tim, I don't know, but we will break the 30% barrier for sure.

Great.

And your next question comes from the line of Jim Covello, representing Goldman Sachs.

This is Mark Delaney calling in for Jim Covello. Hans, I was hoping you might be able to provide a little bit more detail. You spoke at the Analyst Day about being open to the possibility of splitting the Renewables and Thin Film business units, but the market didn't ascribe a certain level of value that you guys see in those businesses. I was wondering if that's still something that the company is considering, and if there's any ramifications either in your materials sourcing or R&D leverage that would impact that decision.

I think that the key point is, we would like to have a better transparency on the market and, therefore, we went into the segment reporting. And, of course, we operate both businesses as independent business units. But we use any kind of synergetic effect either on the supply chain side or the manufacturing side or, of course, in the G&A to keep the cost down as much as we can. But this is for the time being exactly what we do, not more.

Danny, I was wondering if you could help us understand the bookings a little bit more. The $184 million that you reported, does that already recognize all of the large solar projects that you said are going to ship over a couple of year periods or should some of that still come as you get closer to the shipment targets?

It would include the one major project because there's a contract with that project. So that is included. But the rest of it is just normal course bookings.

Okay, great. I appreciate the help, guys.

And your next question comes from the line of Jesse Pichel representing Jefferies. Jesse Pichel - Jefferies & Company, Inc.: Hans, congratulations on the market share gains for high power in the U.S. And can you help us understand the sales cycle for central inverters? How long was the evaluation period on, say, the Arizona project? And who made the final decision? Was it Semper [ph] or Zachry?

I think let's not go too much into details. I think Zachry was the EPC, and we have been part of a competitive selection process. And in my view, Zachry was the final decision maker. And probably based -- as Danny said earlier, based upon the performance of our Solaron inverter as well as, and I think that's an important point, on the service offering, which, of course, has to do something with kind of performance guarantee or guarantee on availability and, therefore, on long-term LCOE harvesting of the energy. Jesse Pichel - Jefferies & Company, Inc.: Are there any specific requirements that the offtaker, PG&E, has on these projects? And could it vary from utility to utility?

Well, I think it could certainly could vary from utility to utility. But the one thing that's happening as these projects get larger, what we're seeing is a move towards the total cost of energy over the lifetime of the project. So it's no more focused on just the box cost initially. As these projects grow in scale and they're looking at a 20-year return, so many factors come into play that we play well in: our efficiency, our service offering, our reliability. All those things are key components in making a decision in today's marketplace.

And I think from a general viewpoint, I think owners of the installation have always the same kind of drivers behind. First, they would like to have the maximum harvest on energy over the lifetime of the installation. And secondly, they would like to have a kind of guarantee that the return of investment, which they put a lot of money upfront in, is, from a risk standpoint, calculable. And therefore, the service part -- and you can just point on that point more and more. The service portion is very important for risk mitigation on their side, in their view. Jesse Pichel - Jefferies & Company, Inc.: And dovetailing with that, what are these utilities or what are the requirements going forward for reactive power? Your thoughts around that, Hans?

Yes, right. I mean, I think it's not a rocket science to anticipate. Somewhere in time, if we go over a certain percentage of renewables fed in the grid, the reactive power becomes an important point. But I think at this point in time yet, we don't see that as a requirement. But I think in the foreseeable future, it will come. And particularly, if you look at the feeder on the substation, I guess that's the right word for it, which is a pretty fragile situation as far as the greatest concern. And therefore, it may come maybe in one or 2 years, the requirement of reactive power fed into the grid. Jesse Pichel - Jefferies & Company, Inc.: Well, that's very helpful. And if I could just ask a housekeeping thing. If I look at your quarter on the 115 million shipped, $37.5 million, ASP is around $0.33, which is pretty high, so I think I'm assuming that these are mostly smaller strength systems, which carry the higher ASP. Where are you selling these systems in Q1? Is it going into distribution channels or where on the geography? Because it seems like Q1 was seasonally quite weak combined with some weather effects there. So it seems like you're shipped an awful lot even in the quarter.

Yes, clearly, our focus is on the commercial and the utility scale. And most of our shipments are. Most of them are above 250 kW. So the price -- math that you do, it's really a result of all of the accessories that go with it. And certainly, some of the residential inverters would drive that up, but the majority of our shipments are 250 and above. Jesse Pichel - Jefferies & Company, Inc.: Great.

And your next question comes from the line of Marc Bachman representing Auriga.

Can you just clear up a couple of things? On your market share, if I heard you correctly, you think you're about 25% moving to 30%. So if I think about terms in the way that your competitor, Satcon, was talking, it sounds like that you expect to even take more share in the North American market. Would that be a fair assumption?

It is.

Okay. Also, on the operating margin side, Danny, you had made mention of a 15% target here for this year on your Renewables business. Can we think of that in terms of 15% for the whole year or do we think of that more of a 15% number that you might be able to achieve by Q4?

We're looking at that as a full year number. Obviously, there's a lot of growth in the Inverter business as projected by AMS and others. I mean, we're looking at 200% to 300% growth in the industry year-over-year, and we're certainly projecting that for the back part of the year. So we think that 15% is a doable number for the full year.

Okay. And then longer term, you thought that, that might get to 20%, is that correct? Or how did you -- put the 20% then in context for us?

Yes, our 20% is our total company overall target. And that 20% really, if you sit back and do the math and we continue to leverage our operating expense at the 50% we challenge ourselves internally to do, you can get to that 20% in the next couple of years with some growth in the top line that's expected in the industry.

Okay. If I think about your Thin Film segment also on the operating progress there or the operating progress, how do I think about the mix of the segments that are there, semi solar, FPD, things like that? And how do I think about progress and then improving the operating margin coming from that part of the business?

That it's a very high operating income on the Thin Film side is a pure mix of the product. And this is dependent on which kind of segments, without breaking it down at this point, which kind of segments are driving the business mostly, either the solar equipment, the glass equipment or the semi side of the business. But one thing is, I think as a bottom line, we have products which have very, very high gross margin, and there's really no, let's say, additional R&D required going forward. We have products which are very new which have still a lot of R&D and which, in some cases, have not this high of a gross margin. And therefore, it's a mix and it could change from one quarter to the other quarter without any kind of major problems occurring out of this.

Okay. Let's see, just two more quick ones here. On the shipment side of the business for your Solar business, can you give us an idea of the split between your Solaron products and the PV Powered products?

I think generally speaking, both are pretty balanced. And, of course, with the occurrence of these big projects, which we just announced, it's tilting a bit to the Solaron side. But I think generally speaking, it's pretty well balanced.

Okay. Last question here then. Between those 2 products lines in your Solar business, the Solaron and the PV Powered products, how is pricing holding up? Are you seeing price declines on either side of that business greater than the other one?

I don't think so.

Yes. I think both of them -- once again, to the audience we're playing to, which is commercial and utility scale, we're talking to them about the levelized cost of energy over the life of the project. So it's not a -- we're not trying to play in the price game of just selling a cheap box. We're selling a levelized cost of energy over 20 years, and those customers are willing to pay for the right quality and the right service offering.

And then -- but on your smaller inverters there, you're not starting to see a massive price erosion given the oversupply situation?

We're not...

Yes, Because we are not playing in the very small inverters, like string inverters or even lower in the residential side of the business. And I think the most vulnerable in that respect is the residential part because there is really no technological differentiation possible. And even the service offering, which is a very valuable asset in our side, is not that important on the residential side.

And your next question comes from the line of Weston Twigg representing Pacific Crest securities.

Sure. Just real quickly since we're at the end of the call. Just wondering if you can explain why the big jump in inventories? And should we expect that to continue to increase?

Yes. Wes, that was simply preparing for the ramp that we see in Q2 and Q3 in our Inverter business. So we wanted to make sure we didn't impact any customer deliveries. And there were certain strategic parts that we ordered early. That's all.

Okay. So that should flatten out or maybe even decline?

That's right. I mean, we certainly see a big ramp in Q2 and Q3 for the Inverter business.

Okay, good. And then just real quickly on the semiconductor revenue. Hans, I know you kind of hit on this already, but do you still think revenue is going to be flat to slightly up this year or are you just kind of holding off on any longer term guidance?

I think I'm still believing it's flat to slightly up.

And your next question comes from the line of Joe Maxa representing Dougherty & Company. Joseph Maxa - Dougherty & Company LLC: I'll just a quick question on the market. You indicated the 2.5 to 3 gigawatts for the North American market this year. How much of that do you expect will come from the commercial and the utility side?

I think that -- at the top of my head, I would say the residential is still 1/3, I would assume.

Yes.

But the commercial and the utility side is growing much, much faster. Joseph Maxa - Dougherty & Company LLC: Is there -- can you give a rough breakout on commercial versus utility? What you think are...

Well, it's pretty equal. But it may change going forward to the utility side of the business because you have seen what we haven't seen before. This number of megawatts on projects are just recently -- and I think this is a trend which will persist then. The more we have the very big ones, the higher the growth rate of the utility is in comparison to the commercial ones. Joseph Maxa - Dougherty & Company LLC: So how many of maybe these larger, let's say, 50-megawatt-plus projects are out there that may come to market this year?

I don't know.

Joe, I really don't have a good number for that. But we are certainly seeing a trend towards larger and larger projects because solar, quite honestly, is getting very cost-effective. As panel prices continue to come down, that helps the overall cost of solar energy. So it is growing.

And your next question comes from the line of David Cassner [ph] Representing Lamond & Company [ph].

Most of my questions were answered, but I'll just have a couple of things I want to get a little more in-depth on. When you talk about the growth in the Renewables side, on the inverter side, how much of that is market share growth that you're anticipating getting and how much is the market growing, let's say, over the next year or 2?

I think because we concentrate on the North American market and what I mentioned before was we would grow our market share probably from 25% to, let's say, 30-plus, so most of the growth which we see comes out of the growth of the market at this point.

Okay. And then just to follow up on the commercial utility breakdown, do you -- can you give some color on how much of the RPI business is commercial and how much is utility for you now?

David, we don't really break that out. I mean,, those are the areas that we focus in. And as Hans said, that's currently about 2/3 of the overall market, but it's the rapidly growing market as more and more utilities get into the game.

At this time, I would like to turn the call over to management for closing remarks.

Well, thanks, everyone, for being on the call. We will follow up with a lot of people with individual calls in the next couple of hours. We really appreciate you listening in this morning. Thank you.

Thank you.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect and have a great day.